Strong quarterly results out of property-and-casualty insurance giants Chubb Ltd. (NYSE: CB) and Allstate Corp. (NYSE: ALL) helped lift insurance sector-related exchange traded funds as lower catastrophe claims and growth in premiums helped strengthen this financial segment.
On Wednesday, the SPDR S&P Insurance ETF (NYSEArca: KIE) rose 2.0%, iShares US Insurance ETF (NYSEArca: IAK) advanced 2.6% and Invesco KBW Property & Casualty Insurance ETF (NYSEArca: KBWP) increased 2.1%.
Meanwhile, Chubb shares surged 6.3% and Allstate jumped 3.6%. CB makes up 10.7% of IAK’s underlying portfolio, 8.0% of KBWP and 2.2% of KIE. ALL makes up 8.4% of KBWP, 4.8% of IAK and 2.4% of KIE.
U.S. insurance companies had to pay out liabilities for Texas tornadoes and California wildfires, but the catastrophe damages were lower compared to the same quarter in 2018 when Hurricane Michael and California wildfires caused historic damages, the Wall Street Journal reports.
Specifically, Chubb’s catastrophe losses was $353 million, compared to $506 million for the prior-year period, while Allstate’s losses dipped to $295 million from $963 million.
Providing a further boost to the sector, Prudential Financial Inc., one of the country’s biggest life insurers by assets, also revealed an increase in net income, but posted declines in sales of certain life-insurance policies and retirement-income products to individuals. The lower-for-longer interest rate environment has weighed down yields on life insurers’ bondholdings, pushing up prices charged to consumers and leading to less-attractive benefits.
Investors are also closely watching price moves in the sector after years of price competition may finally be ending. Chubb’s quarterly results hinted for investors of a diminished price competition across the insurers business.
For instance, Chubb Chief Executive Evan Greenberg said in an earnings call that premium rates are “improved and improving,” pointing to the percentage increases from the mid-single digits to over 20% across different types of coverage.
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